• TrueUSD’s value dropped below $1, sparking a sell-off and concerns about its reserves.

• The stablecoin faced competition, with users favoring alternatives like USDT, partly due to Binance’s changes.

Prominent stablecoin TrueUSD (TUSD) has experienced a serious crisis as its value has fallen below the US dollar peg. Thus creating doubts and concerns regarding the stability of this digital currency. As of today, TUSD plummeted to approximately $0.9708, a notable departure from its $1 target. While it has shown a minor recovery since trading at around $0.9723, the events surrounding TUSD have sparked discussions and speculations within the cryptocurrency community.

The claimed massive sell-off by holders, which involved hundreds of millions of dollars worth of TUSD, is one of the main causes of TUSD’s problems. Users sold over $238.3 million of TrueUSD via the TUSD-USDT trading pair on the last day. In comparison, traders bought about $83.8 million for a net outflow of roughly $154.5 million, according to statistics from Binance. This significant money movement has raised questions concerning the motivations behind such a large sell-off.

On January 10, reports emerged that TrueUSD had temporarily halted its real-time attestations of its reserves, raising suspicions regarding the company’s ability to collateralize its tokens effectively. These events increased worries about the stability of the TUSD even further. As reported by Protos, the corporation subsequently clarified that internal faults were the cause of the event.

TrueUSD’s Response: Enhanced Audit System

TrueUSD has taken action to rebuild confidence and transparency. The issuer of stablecoins declared a major enhancement to its audit mechanism for fiat reserves. This update was carried out in collaboration with MooreHK, an accounting firm in Hong Kong. To further increase transparency into the stablecoin’s operations, the upgraded attestation report now includes more information regarding the reserve funds held by TrueUSD’s financial and fiduciary partners. 

In these first reports, MooreHK attested that TUSD is 101% collateralized, with $1.937 billion in escrowed collateral compared to the $1.925 billion worth of tokens in circulation. This move aims to rebuild investor confidence by ensuring transparency and sufficient collateralization.

Further complicating matters, TrueUSD’s recent difficulties may have been influenced by its relationship with TRON founder Justin Sun. Some speculate that Justin Sun’s cryptocurrency exchange, Poloniex, had a $100 million security breach, which may have indirectly impacted TrueUSD. This incident could have a ripple effect on TrueUSD’s market dynamics and investor confidence.

Factors Behind TUSD’s Depegging

The underlying causes of TUSD’s depegging are still up for debate and investigation. There is a theory that claims doubts about the stablecoin’s reserves might have caused the sell-off. While the reserve problem appears to have been settled, market players might still be worried about TUSD being undercollateralized.

The substantial amount of TUSD traded on Binance for the competitor stablecoin USDT raises another data-driven theory. This pattern corresponds with TUSD’s steady decline in market share relative to other stablecoins on the exchange.

Binance’s role in TUSD’s depegging cannot be ignored. The exclusion of TUSD from Binance’s latest launchpool offering may have eroded investor confidence in the stablecoin. In contrast, FDUSD, a newcomer, is part of the basket of assets users can deposit to participate in the new launchpool project, Manta.